Ring-fencing digital corporations: Investor reaction to the European Commission's digital tax proposals


Klein, Daniel ; Ludwig, Christopher A. ; Spengel, Christoph


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URL: https://madoc.bib.uni-mannheim.de/53492
URN: urn:nbn:de:bsz:180-madoc-534928
Document Type: Working paper
Year of publication: 2019
The title of a journal, publication series: ZEW Discussion Papers
Volume: 19-050
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel)
Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences- CDSS (Social Sciences)
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H25 , H26 , K34 , G14,
Keywords (English): digital taxation , corporate tax , digital economy , event study
Abstract: We study the effect of digital tax measures on firm value. By employing an event study methodology, we analyze investor reaction to the European Commission's proposals on the taxation of digital corporations. Examining the stock returns of potentially affected corporations surrounding the draft directives' release, we find a significant abnormal capital market reaction of -0.692 percentage points. The investor reaction is more pronounced for firms that engage more actively in tax avoidance, have a higher profit shifting potential, and for those with higher exposure to the EU. The market value of digital and innovative corporations decreased by at least 52 billion euro in excess of the regular market movement during the event window. Overall, our study reveals that expectations about ringfencing digital tax measures impact firm values.

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Klein, Daniel ; Ludwig, Christopher A. ORCID: 0000-0001-8268-2196 ; Spengel, Christoph (2019) Ring-fencing digital corporations: Investor reaction to the European Commission's digital tax proposals. Open Access ZEW Discussion Papers Mannheim 19-050 [Working paper]
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